Ice­land ad­vises cap­i­tal con­trols can help

Kathimerini English - - Front Page -

Greece’s cap­i­tal con­trols can help the econ­omy re­cover and don’t have to be dis­rup­tive as long as they’re man­aged fairly, ac­cord­ing to the gover­nor of the only other cen­tral bank in Europe with such re­stric­tions in place. “It is very im­por­tant that you have a kind of ef­fi­cient gov­ern­ment ap­pa­ra­tus that puts the in­ter­ests of ev­ery­body in view and is seen to be fair,” Cen­tral Bank of Ice­land Gover­nor Mar Gud­munds­son said Fri­day in an in­ter­view with Bloomberg Tele­vi­sion in Jack­son Hole, Wy­oming. While “you shouldn’t use them lightly, they can work – they worked in our case.”The At­lantic is­land na­tion is aim­ing to re­move all re­stric­tions on the move­ment of money by 2017, nine years af­ter they were in­tro­duced af­ter a bank­ing col­lapse in Oc­to­ber 2008. Greece, which teetered on the edge of a euro exit this sum­mer af­ter dis­agree­ing with cred­i­tors over aid con­di­tions, lim­its the amount of cash cit­i­zens can with­draw from their bank ac­counts. “There are sig­nif­i­cant dif­fer­ences, be­cause in Greece these are more con­trols on do­mes­tic res­i­dents tak­ing out their money, whereas in our case we had very big bank­rupt­cies of pri­vate banks,” Gud­munds­son said. “We were deal­ing with an over­hang of for­eign claims on the Ice­landic pri­vate sec­tor of maybe half of our” gross do­mes­tic prod­uct, he said. Greece be­came the sec­ond coun­try in the euro area, af­ter Cyprus, to in­tro­duce such curbs, even though in prin­ci­ple Euro­pean law guar­an­tees the free move­ment of cap­i­tal. Cyprus ended its cap­i­tal-con­trol regime this year. Gud­munds­son said of­fi­cial at­ti­tudes on cap­i­tal con­trols have changed com­pletely, with cred­i­tor in­sti­tu­tions such as the In­ter­na­tional Mon­e­tary Fund see­ing them as a use­ful tool. “It was eas­ier in our case be­cause we are an is­land, we’re a small place,” he said. “You have a few banks, and if they play along, then it works. And then it was sup­ported by the pop­u­la­tion, be­cause they knew the cap­i­tal con­trols were im­posed to avoid melt­down of the ex­change rate, which would have had very detri­men­tal ef­fects on their liv­ing stan­dards.”

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